Wipro PAT up 18%, muted guidance for Q4

Despite a better-than-expected increase in profit margins during the quarter ended December 31, 2012, Wipro disappointed observers by providing a muted guidance for Q4 2012-13. On a consolidated basis, the IT major reported net profit of Rs 1,716 crore for Q3, 18 per cent up compared to the corresponding quarter the previous year.

Revenue stood at Rs 10,989 crore, compared with Rs 9,965 crore during Q3 of 2011-12. IT services contributed about 78 per cent to the total revenue and in dollar terms was at $1,577 million, up 4.8 per cent on an annual basis. The segment provided about 92 per cent of the company’s operating income of $327 million.

Wipro expects IT services revenue to be in the range of $1,585 million to $1,625 million for Q4. The segment had 1.42 lakh employees as of December 31, 2012, an increase of 2,336 people in the quarter. The company added 50 customers during Q3.

Daljeet Kohli, head of research at IndiaNivesh Securities, said, “Wipro’s results were largely in-line with our and street estimates (except for dollar revenue). IT services dollar revenue grew by 2.4 per cent QoQ led by 3.8 per cent quarterly increase in IT pricing, partially offset by 1 per cent decline in volume. Despite in-line performance, negative volume growth and below expected guidance remains a concern. However, continuous expansion in the pricing from last two quarter looks encouraging. We maintain our target price of Rs 457 a share and downgrade our rating to hold, due to limited upside potential from current level.”

According to T K Kurien, executive director and chief executive officer - IT Business at Wipro, the company saw broad-based growth in the quarter with all verticals growing sequentially. Improvement in customer and employee engagement reflected in client mining with 10 customers contributing more than $100 million.

Meanwhile, Wipro’s IT products segment recorded revenue of Rs 997 crore for the quarter, an annual increase of about 11 per cent. Operating income to revenue for the segment was 2 per cent during the quarter. The consumer care and lighting business grew by about 17 per cent year-on-year to report Rs 1,028-crore revenue with operating income being 14 per cent of revenue.

Wipro declared an interim dividend of Rs 2 a share, the payment date of which has been fixed as January 30, 2013. Lower single-digit guidance dampened market sentiments and the company’s stock price ended Friday at Rs 397.15 on BSE, 7.88 per cent down compared to the previous day’s close.